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Victorian Auditor -General’s Office

Local Governm

ent Assets: A

sset Managem

ent and Compliance

2018–1

9: 1

9M

ay 2019

Independent assurance report to Parliament2018–19: 19

Local Government Assets:

Asset Management and Compliance

May 2019

23431 VAGO_Local Gov Assets- Asset Man & Compl_Cover.pdf | of 1 23431 VAGO_Local Gov Assets- Asset Man & Compl_Cover.pdf | Page 1 of 1

Local Government Assets: Asset

Management and Compliance

Independent assurance report to Parliament

Ordered to be published

VICTORIAN GOVERNMENT PRINTER

May 2019

PP no 25, Session 2018–19

This report is printed on Monza Recycled paper. Monza Recycled is certified Carbon Neutral by The Carbon Reduction Institute

(CRI) in accordance with the global Greenhouse Gas Protocol and ISO 14040 framework. The Lifecycle Analysis for Monza

Recycled is cradle to grave including Scopes 1, 2 and 3. It has FSC Mix Certification combined with 99% recycled content.

ISBN 978 1 925678 43 7

The Hon Shaun Leane MLC The Hon Colin Brooks MP

President Speaker

Legislative Council Legislative Assembly

Parliament House Parliament House

Melbourne Melbourne

Dear Presiding Officers

Under the provisions of section 16AB of the Audit Act 1994, I transmit my report

Local Government Assets: Asset Management and Compliance.

Yours faithfully

Andrew Greaves

Auditor-General

23 May 2019

Victorian Auditor‐General’s Report Local Government Assets: Asset Management and Compliance 5

Contents

Audit summary ............................................................................................................. 7

Conclusion ......................................................................................................................................... 7 Findings .............................................................................................................................................. 8 Recommendations ........................................................................................................................... 11 Responses to recommendations ..................................................................................................... 11

1 Audit context ........................................................................................................... 13

1.1 Background ............................................................................................................................. 13 1.2 Roles and responsibilities ....................................................................................................... 14 1.3 Legislation ............................................................................................................................... 15 1.4 Frameworks and guidance ...................................................................................................... 15 1.5 Using asset information .......................................................................................................... 17 1.6 Why this audit is important .................................................................................................... 20 1.7 What this audit examined and how ....................................................................................... 21 1.8 Report structure ..................................................................................................................... 22

2 Managing asset information ................................................................................... 23

2.1 Conclusion .............................................................................................................................. 23 2.2 Asset information governance arrangements ........................................................................ 23 2.3 Identifying asset information needs ....................................................................................... 24 2.4 Asset information management processes ............................................................................ 26 2.5 Accuracy and completeness of asset information .................................................................. 29 2.6 Asset information management systems ............................................................................... 31

3 Using asset information .......................................................................................... 35

3.1 Conclusion .............................................................................................................................. 35 3.2 Asset management governance ............................................................................................. 35 3.3 Asset planning and decision‐making ..................................................................................... 37 3.4 Asset risk informing investment decisions ............................................................................. 38 3.5 Comparison of audit findings with NAMAF ............................................................................ 39

Appendix A. Audit Act 1994 section 16—submissions and comments ..................... 41

Appendix B. Maturity assessments ............................................................................ 53

6 Local Government Assets: Asset Management and Compliance Victorian Auditor‐General’s Report

Acronyms

AIMS asset information management system

ALGA Australian Local Government Association

AMAF Asset Management Accountability Framework

AMP asset management plan

DELWP Department of Environment, Land, Water and Planning

DRFA Disaster Recovery Funding Arrangements

DTF Department of Treasury and Finance

IIMM International Infrastructure Management Manual

ISO International Organization for Standardization

LG Act Local Government Act 1989

LGPMC Local Government and Planning Ministers' Council

LGV Local Government Victoria

MAV Municipal Association of Victoria

NAMAF National Asset Management Assessment Framework

NDRRA Natural Disaster Relief and Recovery Arrangements

RM Act Road Management Act 2004

SAMP Strategic Asset Management Plan

VAGO Victorian Auditor‐General’s Office

VGC Victoria Grants Commission


Audit summary

One way in which local councils deliver services to the community is through

effective use of their assets. Council assets include roads, bridges, footpaths,

drains, libraries, town halls, parks, recreational centres, and other community

facilities. The 79 Victorian councils control more than $102.1 billion in assets

and infrastructure, including $26.5 billion in roads and bridges and $8.7 billion in

drains.

To ensure they realise full value from these assets, councils need to effectively

plan for, manage, and utilise them. Effective management of these assets

requires the collection of appropriate information, including their value, cost to

maintain and operate, condition, performance, risk and utilisation. Councils

should then use this information to make decisions about their assets. These

asset management decisions include how and when to invest in new assets, as

well as decisions about maintenance, replacement, upgrades, and disposals.

This audit assessed whether local councils accurately document infrastructure

assets in their information systems and use this information in their asset

management and planning.

The audit focused on five local councils:

Colac Otway Shire Council (Colac Otway)

Darebin City Council (Darebin)

Hindmarsh Shire Council (Hindmarsh)

Mildura Rural City Council (Mildura)

Nillumbik Shire Council (Nillumbik).

The audited councils do not have enough comprehensive and accurate

information to support asset planning, and they do not make enough use of the

information that they have. Although they maintain basic data about their

assets—such as location and description—councils do not always supplement

this with asset maintenance and failure data. This reduces their ability to

identify poor performing assets and to justify new asset investments.

Councils use some asset information to support asset planning and decision‐

making, however, this is not consistent across all asset classes and councils. For

example, all audited councils have and use better information about their roads

than other asset classes, largely due to their obligations under the Road

Management Act 2004 (RM Act).

Complex and unintegrated asset information management systems (AIMS)

compound the information gaps, which make it difficult for staff to find the

asset information they need to support decision‐making. This means asset

decisions depend heavily on the experience and judgement of individual staff

without the benefit of objective data.

Conclusion


Managing asset information

Asset management policy, governance, and roles

All audited councils have governance arrangements for asset information

management within their asset management policies, although Darebin and

Colac Otway could improve this by clarifying roles and responsibilities. In an

example of better practice, Nillumbik has a data framework that outlines the

information the council will collect against each type of asset. Mildura is

developing similar guidelines.

Identifying asset information needs

None of the audited councils have comprehensively documented their asset

information needs. However, all audited councils have asset management plans

(AMP)—either final or draft—that identify and prioritise asset information

needs for roads and related infrastructure—such as traffic control signs and

street lights.

Councils need to identify and document their legal obligations about asset

information to ensure that they collect the right type of information. Colac

Otway, Mildura and Nillumbik have done this—their AMPs refer to relevant

regulatory and statutory requirements. In contrast, Hindmarsh has not fully

documented its obligations and Darebin has only noted its legal obligations

about roads information.

Except Nillumbik, the audited councils keep information about essential safety

measures and asbestos registers separate from their standard AIMS. Not

keeping this information in a central and accessible location makes it difficult for

council staff to find and update the information when they need to.

None of the audited councils have identified the asset information they need to

support claims for funding under the Disaster Recovery Funding Arrangements

(DRFA). As a result, councils risk not having the right information to satisfy

claims for funding in the event of a natural disaster.

Information management processes

Documenting new assets

Nillumbik, Hindmarsh and Mildura have documented processes for recording

new asset information. In contrast, Colac Otway and Darebin advise that they

sometimes record information about new assets as they find them, for example

during condition inspections.

Asset handover occurs when teams within a council transfer responsibility for an

asset, such as when a new asset transfers from the construction team to the

team responsible for operating the asset. Ineffective asset handover processes

can affect data quality. For example, Colac Otway advised that during fire and

flood recovery work, its asset handover process failed—the council acquired

new assets but did not record them in its AIMS. This means the council's asset

information was not complete and up‐to‐date at that time.

Findings

Essential safety measures are the features of public buildings that ensure the safety of occupants, such as fire doors, alarm systems, fire extinguishers and emergency lighting.

Under the Disaster Recovery Funding Arrangements, the Australian Government can give funding to state and local governments after a natural disaster to repair assets. To satisfy claims for this funding, councils need information about the pre‐disaster function and condition of assets.


Asset maintenance and failure information

The maintenance and failure history of an asset helps councils to predict the

likelihood of future failures or performance issues. None of the audited councils

have documented processes to capture this information and, as a result, have

missed opportunities to use maintenance data to inform decisions about

operational and capital planning. For example, councils do not record the cost of

maintenance works against specific road assets. This means they can only access

the overall cost of their road maintenance program and cannot analyse the cost

of maintaining each road.

Similarly, except for Darebin, the audited councils link maintenance data to

buildings, rather than to component assets—such as air conditioner units or

generators. This means councils must use an overall average of a building’s

condition to predict future maintenance and renewal costs. This is ineffective, as

component assets may require renewal or replacement at different times.

Accuracy and completeness of asset information

We asked councils to self‐assess the completeness of their asset information as

well as their confidence in it. We then tested the assessments by reviewing a

sample of asset records from roads, stormwater and building asset classes.

Based on this process, Nillumbik has the highest completeness across all asset

classes, with an average completeness of 89 per cent, compared with an

average of 41 per cent across the remaining audited councils. The audited

councils have a greater proportion of complete data on their road and related

assets—an average of 67 per cent across the councils—than other asset classes.

Councils need to be confident that their asset information is accurate and

complete, so that they can use it to make evidence‐based decisions. Except

Nillumbik, the audited councils had low confidence that their asset information

was accurate and complete. The audited councils had more confidence in their

roads data than in their other asset classes—they had high confidence in the

information for 45 per cent of their road assets. In contrast, the audited councils

had high confidence in only 25 per cent of building assets, 20 per cent of drains,

bridges and culverts and 18 per cent of recreation assets—such as sporting

fields, playgrounds, and trees.

Nillumbik had higher confidence in its recreational asset information because it

had identified and documented these assets in its Reserves Asset Management

Plan.

Asset information management systems

AIMS are software applications for capturing, managing and analysing asset

information. Ideally, a council's AIMS should comprise a small number of

integrated core software products.


Except Mildura, the audited councils have complex AIMS and use multiple

software applications to manage their asset information, which are not well

integrated. In addition, Hindmarsh and Colac Otway have limited

documentation on how to use or manage their applications. This can lead to

council staff manually transferring data from one application to another,

resulting in inefficiencies and potential errors.

In 2014, Mildura purchased and began implementing a new AIMS. The system

represents better practice in that it links to the council's customer relationship

management system, geographic information systems and, through a manual

export process, its finance system. Although it requires further effort to fully

implement and transfer information into the system, the council has established

a project control group to oversee its implementation and progressively improve

the system.

Using asset information

Capital and operational planning

Relying on staff judgement to make decisions about assets—rather than asset

information and documented processes—creates a risk that councils will not

make evidence‐based decisions. Darebin, Hindmarsh and Mildura rely heavily

on council staff experience when making asset management decisions, and do

not always document these decisions.

None of the audited councils have sufficient documentation on capital planning

processes to adequately support evidence‐based asset management for all

asset classes, and over the asset lifecycle. Nillumbik, Mildura and Darebin are

applying some processes to use asset data and information to inform capital

plans, especially relating to roads and related infrastructure and drainage.

Similarly, none of the audited councils have sufficiently documented their

operational planning processes, although Colac Otway and Hindmarsh use some

maintenance and operational cost data to inform operational plans and

budgets. The other three councils—Nillumbik, Mildura, and Darebin—only use

previous historical maintenance costs for developing their annual maintenance

budgets. These councils have recognised a gap in their processes and advise

they are working on projects to rectify the issue.

Using asset risk

None of the audited councils consistently use risk information in their

decision‐making across all asset classes, though all use more risk information

when planning for road and drainage assets.

Audited councils do not have formal processes for assessing which assets are

critical or important to service delivery, which would help them prioritise

investment and works activities. Despite a lack of processes, all audited councils

except Colac Otway use risk assessment to identify critical drains.


Asset management capability and resources

None of the audited councils’ resource capability plans identify a need for skills

in analysing asset information. In addition, none have established clear roles

and responsibilities for the use of asset information in asset planning and

decision‐making. Without this, councils cannot be sure they have the skills

available to use asset information to support decision‐making about assets.

We recommend that Victorian councils:

1. revise their governance and policy guidance for asset investment

decision‐making to ensure that it is evidence‐based (see Section 3.2)

2. clearly determine and document the information that they need for

effective asset reporting and decision‐making, including ensuring Disaster

Recovery Funding Arrangements needs are met (see Section 2.3)

3. establish more consistent and systematic processes for data collection on all

asset classes to a level commensurate to the criticality of the asset and

implement them to collect the information (see Section 2.4)

4. integrate asset management information systems so staff can easily record

and access data to enable analysis for planning and decision‐making

(see Section 2.6)

5. identify their critical assets, and the potential risks of their failure, to inform

investment priorities (see Section 3.4)

6. integrate asset management planning into financial planning cycles and

processes to ensure councils balance asset investment needs against their

objectives and funding constraints (see Section 3.3)

7. evaluate their capability, including resources, skills and training to meet

their identified asset management needs, potentially using the National

Asset Management Assessment Framework (see Sections 3.2 and 3.5).

We have consulted with the audited councils and we considered their views

when reaching our audit conclusions. As required by section 16(3) of the Audit

Act 1994, we gave a draft copy of this report to the councils and asked for their

submissions or comments. We also provided a copy of the report to the

Department of Premier and Cabinet.

All audited councils have accepted the recommendations from this audit.

Councils’ full responses are included in Appendix A.

Recommendations

Responses to recommendations


Audit context

One way in which local councils deliver services to the community is through

effective use of their assets. Council assets typically include roads, bridges,

footpaths, drains, libraries, town halls and recreational centres, and may

include other specialised facilities such as airports and landfills. The 79 Victorian

councils control more than $102.1 billion in assets and infrastructure, including

$26.5 billion in roads and bridges and $8.7 billion in drains, as shown in

Figure 1A.

Figure 1A Victorian local government assets ($ billion), 2017–18

Note: ‘Other infrastructure assets’ includes works in progress, waste management, recreational facilities, aerodromes, and car parks. Note: ‘Other’ includes investment property and other intangible and financial assets.

Source: VAGO, based on council annual reports.

To ensure they realise maximum value from their assets, councils need to

manage and utilise them effectively. Asset management is the systematic

process that guides the planning, acquisition, operations, maintenance, and

eventual replacement or disposal of assets. Its purpose is to ensure councils’

assets allow them to deliver services that meet community standards and needs

efficiently, while managing risks.

48.17

26.49

10.57

8.73

3.803.55

0.81

Land

Roads and bridges

Building, plant and equipment

Drainage

Parks and footpaths

Other infrastructure assets

Other

1.1 Background


Effective asset management includes collecting appropriate information and

using it to make decisions on planning and managing assets. The types of

information for councils to collect include asset value, cost to operate and

maintain, condition, maintenance, performance, risk, and utilisation.

Multiple government agencies and associations provide information and

guidance to the local government sector to support councils’ asset management

activities.

Local Government Victoria

Local Government Victoria (LGV)—a division of the Department of Environment,

Land, Water and Planning (DELWP)—provides advice and support to councils to

improve their business and governance practices, including asset management.

Its objectives include the development and implementation of evidence‐based

policy and projects that strengthen councils’ capacity to meet the needs of

Victorian communities.

Guidelines released to support better asset management practice include:

Local Government Asset Management: Better Practice Guide (2015)

Good Practice Guide for Asset Protection Permits in Local Government

(2013)

Local Government Asset Investment Guidelines (2006)

Guidelines for Measuring and Reporting the Condition of Road Assets (2006)

Guidelines for Developing an Asset Management Policy, Strategy and Plan

(2004)

Sustaining Local Assets: Local Government Asset Management Policy

Statement (2003).

Municipal Association of Victoria

The Municipal Association of Victoria (MAV) runs the STEP Asset Management

and Financial Sustainability Program, which it has designed to help councils

improve their asset management processes with support from asset

management consultants. The STEP program uses the National Asset

Management Assessment Framework (NAMAF) (discussed in Section 1.4) as a

basis for assessing councils’ asset management performance.

Victoria Grants Commission

Victoria Grants Commission (VGC), supported by DELWP, allocates financial

assistance grants from the Australian Government to Victorian councils.

It collects data on a range of asset‐related matters, including capital assets and

outlays, valuations, and road inventory expenditure.

1.2 Roles and responsibilities


Section 140(2) of the Local Government Act 1989 (LG Act) requires councils to

ensure they have adequate control over their assets. Further, section 136 of the

LG Act requires councils to manage their financial risks prudently, having regard

to economic circumstances, including the management and maintenance of

assets. Unlike the Financial Management Act 1994, which does not apply to

councils, there is no explicit obligation under the LG Act for councils to maintain

an asset register.

The previous government introduced the Local Government Bill 2018 in the

Parliament in May 2018. If enacted, it would have replaced the current LG Act.

The Bill proposed a requirement for a 10‐year AMP as well as a 10‐year financial

plan and a four‐year budget. These changes aimed to encourage councils to

consider short, medium, and longer‐term approaches to asset management and

resource planning. In the lead up to the 2018 state election, the Bill lapsed,

leaving the LG Act as the legal framework for Victorian local government.

A range of applicable legislation covers aspects concerning council‐owned

assets. Some of these include:

Road Management Act 2004—local roads are one of the most significant

asset classes that councils own, representing more than a quarter of the

total value of Victorian council assets. Under the RM Act, councils must

maintain a register of all public roads for which they are the coordinating

road authority.

Occupational Health and Safety Act 2004—promotes improved standards

for occupational health, safety, and welfare. It places obligations on councils

to provide a safe working environment for their employees and to ensure

that councils maintain their plant and equipment in a manner that is safe

and fit for purpose.

Building Regulations 2018—as owners of public buildings, councils must

keep records of maintenance checks, service and repair works for essential

safety measures (such as fire alarms and emergency lighting).

Councils can access guidance on asset management and asset information from

a range of sources.

National Asset Management Assessment Framework

Since 2010, Victorian councils have self‐assessed against NAMAF, developed by

the Australian Centre of Excellence for Local Government. NAMAF consists of

11 key asset management elements, including councils’ asset data and systems.

Asset Management Accountability Framework

The Department of Treasury and Finance's (DTF) Asset Management

Accountability Framework (AMAF)—applicable to Victorian Government

agencies—outlines requirements over four key stages of the asset management

lifecycle, from planning, acquisition, operation, and maintenance, to disposal.

1.3 Legislation

1.4 Frameworks and guidance


The AMAF, although not compulsory for Victorian councils, provides useful

guidance on how councils can manage their asset information. The AMAF sets

out that agencies must maintain asset information—both financial and non‐

financial—to support asset planning, and performance monitoring and

reporting.

ISO 55000 Asset Management

The International Organization for Standardization's ISO 55000:2014 Asset

Management (ISO 55000) provides a global guide to better practice in asset

management, including asset information management.

ISO 55000 specifies that entities should align information requirements to asset

management needs and risks, along with requirements for collecting, managing,

evaluating, and ensuring consistency and availability of information for asset

management decision‐making.

ISO 55000 identifies several requirements for sound asset information. These

are summarised in Figure 1B.

Figure 1B Elements of sound asset information

Element Description

Information governance

Define roles and responsibilities for managing asset information and processes to ensure asset information is suitable to achieve council objectives.

Information requirements

Identify the asset information needed to support:

asset management functions

asset management systems

the council's objectives

legal and regulatory requirements.

Better practice is to capture this in a strategy, including actions to improve the asset information over time.

Information management

Formalise processes for managing asset information. The processes should ensure that information is available and suitable for councils’ needs. They will describe how councils collect, analyse and evaluate information. Asset information should have appropriate coverage and accuracy, and be consistent with other data held by councils.

Information systems Ensure capability to store, manage, access, analyse and share information for asset management, planning and decision‐making purposes. Councils make continual improvements for ongoing adequacy and effectiveness.

Source: VAGO, based on ISO 55001:2014.


Institute of Public Works Engineering Australasia

The Institute of Public Works Engineering Australasia has released materials

since 1994 designed to support asset management processes and AMP

development. These materials, which provide guidance on asset management

information and its use in planning, include:

International Infrastructure Management Manual (IIMM)

Australian Infrastructure Financial Management Manual.

There are three key types of asset information, as shown in Figure 1C.

Figure 1C Types of asset information

Source: VAGO.

Asset management and planning

Asset information, including the asset's condition, is essential to support a range

of important council decisions. Councils should use their asset information in

developing their long‐term strategic and financial plans.

A 2016 Queensland Audit Office report found that, due to inaccurate and

incomplete asset condition data, councils were undertaking asset renewals in an

unstructured and reactive manner. The report noted that this limited their

understanding of the level at which to set council rates and charges and how to

optimise the life of the assets.

Similarly, a 2017 report by the Controller and Auditor‐General of New Zealand

highlighted that high‐quality asset information improved councils’ longer‐term

planning.

1.5 Using asset information


Figure 1D shows the Victorian local government sector's renewal gap—the

difference between what a council spends on renewing, restoring or replacing

existing assets and its depreciation costs—over the past four years.

Figure 1D Asset renewal expenditure as a percentage of depreciation, 2014–15 to 2017–18

Source: VAGO, based on LGV’s Local Government Performance Reporting Framework.

Due to considerable population growth, interface councils spend a much larger

proportion of their budget on new assets compared with the other council

cohorts, and less on asset renewal. Interface councils have the lowest ratio of

asset renewals, at about 50 per cent, while metropolitan councils have

improved in the past few years.

Natural disasters and asset information

The Australian Government provides funding to the states and territories for up

to 75 per cent of their relief and recovery costs following a natural disaster.

Councils can receive financial support for costs associated with the restoration

and replacement of essential public assets such as roads and bridges, public

hospitals, schools, local government offices and stormwater infrastructure that

are a direct result of damages due to a natural disaster.

On 1 November 2018, the DRFA replaced the former Natural Disaster Relief and

Recovery Arrangements (NDRRA). Councils can submit claims for

reimbursement to DTF, which administers the arrangements in Victoria.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014–15 2015–16 2016–17 2017–18

Renewal as

percentage of depreciation

Metropolitan Interface Regional Large shire Small shire

Interface councils refers to a group of 10 municipalities that form a ring around metropolitan Melbourne.


Under the DRFA, the Australian Government will give funding only to restore an

asset to its pre‐disaster function. This means that if a natural disaster destroys

an asset, the Australian Government will not cover the cost of improving it. The

DRFA sets out the Essential Public Asset Function Framework, which state and

local governments must use to decide the pre‐disaster function of assets.

Under the DRFA, to make a claim for reimbursement for the restoration or

replacement of an essential public asset, state and local governments must be

able to provide supporting evidence of the pre‐disaster condition and function

of their assets. This needs comprehensive and up‐to‐date asset information

management. Examples of this include asset information for condition, asset

maintenance, and visual and geospatial data.

Councils also must prepare and maintain Municipal Emergency Management

Plans under the Emergency Management Act 1986. Under this legislation,

councils play a role in the provision of relief and recovery services and in

supporting emergency response operations. Reliable asset information is

important for implementing Municipal Emergency Management Plans.

Funding asset management

Under the LG Act, councils have the power to levy rates and charges to fund and

deliver essential community infrastructure and services. The delivery of many of

these services depends on asset performance.

Fair Go Rates System

In 2015, the Victorian Government introduced the Fair Go Rates System, which

enables the Minister for Local Government to establish a yearly rate cap that

limits councils’ ability to increase their rates and municipal charges each year.

This acts as a constraint on how councils have previously raised revenue. To

increase rates beyond the cap, councils must apply to the Essential Services

Commission.

Under section 185E of the LG Act, councils applying for a higher cap must

demonstrate a range of factors, including:

how councils have considered the views of ratepayers and the community in

proposing the higher cap

how the higher cap is an efficient use of council resources and is value for

money

whether the council has considered re‐prioritising proposed expenditure

and alternative funding options and why those options are not adequate.


The Essential Services Commission has advised that councils seeking a higher

rate cap must establish a long‐term funding need. The council needs to

demonstrate this through a rigorous approach to long‐term financial planning,

which can include:

service reviews—service planning and service prioritisation—leading to

affordable services and service levels, informed by community engagement

asset management planning that identifies cost‐effective outlays and is

based on properly considered and documented risk‐management practices

rigorous and well‐documented financial strategies and practices.

Under the Fair Go Rates System, a key challenge for councils is to become more

efficient while continuing to deliver services, maintain infrastructure, and renew

assets that meet the needs of their communities.

The effectiveness of asset management processes, the quality and

appropriateness of AIMS data and integration with council planning process are

key elements to addressing this challenge.

Strategic and financial planning

The current LG Act requires councils to develop strategic and financial plans,

including:

a four‐year council plan that outlines the council’s strategic objectives and

strategies for achieving these

a four‐year strategic resource plan that details the resources needed to

achieve the council’s strategic objectives

an annual budget that outlines how the council will deliver specific services

and initiatives.

The quality of these plans is heavily dependent on the maturity of a council's

asset management processes, and the quality of their asset information.

Councils should integrate asset management and planning with their strategic

and financial planning processes. Ideally, the AMPs for essential infrastructure

asset classes should outline the current asset management strategy, use asset

information to detail current condition and risk, and make funding

recommendations for both capital requirements and operational programs.

Our audits of councils’ asset management practices over the past 15 years have

found persistent weaknesses and recommended that councils improve their

asset management frameworks and their related policies, strategies, and plans.

Our 2014 audit Asset Management and Maintenance by Councils found

problems with councils’ asset management frameworks and strategies, and that

asset management information systems at councils were underdeveloped.

More recently, results of our 2016–17 financial audits of local government show

that councils are experiencing a gradual decline in asset renewal and

maintenance indicators and are forecasting reduced spending in this area.

1.6 Why this audit is important


We also found issues with councils’ asset information management practice. In

2016–17, 29 councils identified $175.3 million in found assets—assets that they

had not known about or previously recorded. Assets that are not recorded are

not subject to regular maintenance and may continue to deteriorate, resulting

in considerable long‐term costs. We found that although councils have

improved their asset registers through technological advances, including global

positioning systems, councils need further work to reduce the number of found

assets across the sector.

In this audit, we looked at whether councils have comprehensive and accurate

information about assets and whether councils use asset information to support

effective evidence‐based asset management and planning.

We did not look at large specialised assets—such as airports and landfills—as

these are generally operated as separate business units and council asset teams

do not manage them.

We audited a mix of councils to provide a view across the state and across

council categories, as shown in Figure 1E.

Figure 1E Audited councils and council categories

Audited council Council category

Colac Otway Large shire

Darebin Metropolitan

Hindmarsh Small shire

Mildura Regional city

Nillumbik Interface

Source: VAGO.

The methods we adopted for this audit included:

discussions and formal interviews with staff at audited councils

assessment of councils’ asset management systems and processes

assessment of the comprehensiveness and accuracy of the asset data

testing of actual council assets and plans against council asset registers and

other asset data

case studies of asset information management practices at the audited

councils.

The audit did not undertake a full review of councils’ NAMAF self‐assessments.

However, we did test whether councils have accurately assessed themselves in

areas that this audit examined, as discussed in Section 3.5.

1.7 What this audit examined

and how


Audit assessment tools

Drawing on available better practice material, we developed a tool to assess

councils’ asset management practices against a scale of asset management

maturity. We initially assessed councils in a one‐day workshop with council staff,

and agreed on scores against the maturity scale. We later adjusted these scores

based on documentary evidence that the councils provided. This formed the

basis of our audit findings, a summary of which is available in Appendix B.

We also developed a tool to assess the completeness of councils’ asset

information, as well their confidence in it. Councils self‐assessed this using our

tool. We then moderated these results based on further documentation and by

reviewing a sample of assets and asset records. Section 2.5 outlines the results

of this assessment.

We conducted our audit in accordance with section 15 of the Audit Act 1994

and ASAE 3500 Performance Engagements. We complied with the

independence and other relevant ethical requirements related to assurance

engagements. The cost of this audit was $320 000.

This report is set out as follows:

Part 2 examines the information councils collect and maintain about their

assets.

Part 3 examines how councils use that information to support effective

evidence‐based asset management and planning.

1.8 Report structure


Managing asset

information

Comprehensive and accurate asset information enables councils to make

informed decisions about their assets—for example, decisions about

maintaining, renewing, and replacing assets.

The audited councils do not have enough comprehensive and accurate

information to understand asset performance and enable evidence‐based

decision‐making. Although they maintain basic data about their assets—such as

location and description—councils do not always supplement this with asset

maintenance and failure data. This reduces their ability to identify poor

performing assets and justify new asset investments.

The audited councils collect more detailed asset information where there is a

legal requirement to do so—for example, all audited councils have better

information about their roads than other asset classes, due to obligations under

the RM Act.

Except for Mildura, the audited councils store their asset information across a

range of partially integrated systems, making it difficult for staff to access and

manage information. This further reduces the ability of decision‐makers to find

and use asset information to support decision‐making.

Governance arrangements for asset information should:

identify roles and responsibilities for capturing, managing and maintaining

all asset information

establish procedures to ensure the council collects, maintains and manages

all information efficiently.

All audited councils have governance arrangements for asset information

management within their asset management policies.

2.1 Conclusion

2.2 Asset information governance

arrangements


Nillumbik, Mildura and Hindmarsh outline more specific and clear roles and

responsibilities for asset information—for example, responsibility for assuring

the quality of the information—in position descriptions or in AMPs. This detail

improves staff accountability for managing asset information.

Mildura and Colac Otway have asset management steering groups with defined

roles and responsibilities, such as responsibility for monitoring asset

management. This arrangement provides better coordination of asset

information requirements.

However, no audited council has clearly nominated data owners and data

custodians. Darebin, Colac Otway and Hindmarsh advise that they see asset

data control and assurance as the responsibility of the assets team. However, by

not documenting roles and responsibilities, there is a risk that council staff

across the organisation do not know who is accountable for data quality, use

and security.

Guidelines and frameworks

Data guidelines or frameworks help councils standardise data collection and

maintenance to ensure consistency.

In an example of better practice, Nillumbik has a data framework that outlines

the information the council will collect against each type of asset. Mildura is

developing similar guidelines.

The more information councils have about their assets, the more evidence they

have to support decision‐making on asset maintenance, renewal and

replacement. However, not all assets require the same level of information—

critical, riskier and higher‐cost assets, such as bridges and roads, require more

information. Councils should identify the level of asset information they need to

support management and decision‐making, and to meet legal requirements.

None of the audited councils have comprehensively documented all their asset

information needs. However, all audited councils have AMPs—either final or

draft—that identify and prioritise asset information needs for roads and related

infrastructure.

Legal requirements for asset information

As outlined in section 1.3, councils have a range of legal obligations about how

they manage their asset information. Councils need to identify and document

these obligations in their AMPs to ensure that they collect the right type of

information. Colac Otway, Mildura and Nillumbik have done this—their AMPs

refer to relevant regulatory and statutory requirements. In contrast, Hindmarsh

has not fully documented its obligations in AMPs, and Darebin has only noted its

legal obligations about roads information.

The data owner has ultimate responsibility for the data. The data custodian is the person with the delegated authority from the data owner to approve the use and access of the data.

2.3 Identifying asset information

needs


Road management information

Under the RM Act, councils must maintain a register of all public roads for which

they are the coordinating road authority, however, they can choose whether to

develop a formal road management plan that sets out its system for maintaining

and repairing roads. We found that all audited councils keep a register and a

road management plan.

Due to these obligations, councils have better asset information about roads

than other asset classes, and are better at using roads data in planning and

decision‐making. We discuss this further in Sections 2.5 and 3.3 of this report.

Essential safety measures

Councils, as owners of public buildings, must keep records of maintenance

checks and service and repair works for essential safety measures, such as fire

doors and alarm systems. Except Nillumbik, the audited councils keep

information about essential safety measures separate to their standard AIMS.

By keeping this information across multiple locations, councils create a risk that

staff will be unable to find and update the information.

In contrast, Nillumbik addresses this risk by transferring information from its

essential safety measures and asbestos audits—including compliance status and

inspection dates—into its AIMS. It also has a documented procedure for

essential safety measure audits, which also assigns responsibilities for

monitoring compliance.

Asbestos registers

Under the Occupational Health and Safety Regulations 2017, anyone who

controls a building or workplace where asbestos has been identified must

maintain a register which notes the location and type of asbestos as well as any

workplace activities likely to disturb it.

All audited councils have asbestos registers. Mildura maintains asbestos

registers but does not include this information in its general asset register.

Disaster Recovery Funding Arrangements

None of the audited councils refer to the DRFA in their AMPs. This includes

Colac Otway, which received financial assistance through the federal

government's previous disaster relief program, the NDRRA. This creates a risk

that councils may fail to collect appropriate information about their assets and

may not be able to satisfy claims for financial assistance.


To ensure that asset information is accurate and consistent, councils need to

document their processes for capturing, maintaining and improving asset

information, rather than rely solely on staff expertise and knowledge.

Capturing new assets

To maintain comprehensive asset information, councils need to capture and

record information about the new assets they acquire. Councils should do this

at the point of asset handover.

Nillumbik, Hindmarsh and Mildura have formal processes for capturing new

asset information as part of the asset handover process. In an example of better

practice, Nillumbik captures this information through an online process.

Hindmarsh advised that it is in the initial stages of improving their process by

implementing an asset handover form.

In contrast, Colac Otway and Darebin do not have established processes for

documenting new assets during asset handover. Both councils advise that they

do not have established processes for finding assets. If they find assets during

condition inspections they typically record the assets. Processes such as these

are ineffective, as they create a risk that councils will fail to record information

about new assets. For example, Colac Otway advised that during fire and flood

recovery work, its asset handover process failed—the council acquired new

assets, but did not record them in the council's AIMS. This means the council's

asset information was not complete and up‐to‐date at that time.

Colac Otway and Darebin advise they are now planning improvements to their

asset handover processes.

Asset maintenance and failure data

Understanding the maintenance and failure history of an asset helps councils to

predict the likelihood of future failures or performance issues. This allows

councils to identify and plan preventive maintenance on assets to avoid failure.

The audited councils do not have adequate processes to capture detailed asset

maintenance and failure information. This reduces their ability to analyse and

make informed decisions for operational and capital planning. All audited

councils—except Hindmarsh—have documented improvement actions to

remedy this.

Roads and related assets

By value, roads, bridges, and related infrastructure represent 26 per cent of

council assets in Victoria. As a result, councils devote a significant proportion of

their asset maintenance activities to roads. The road management plans at each

council provide well‐documented maintenance performance criteria and

intervention levels.

2.4 Asset information

management processes

Asset handover is the process of transferring the responsibility for maintaining and managing a new asset from the staff that constructed it to the staff that will be responsible for its ongoing management.

Intervention level refers to the lowest condition level of an asset that a council will allow; that is, the point in the asset's life that the council has decided is appropriate for renewal or replacement.


Asset teams at the audited councils do not always receive feedback from the

staff who complete maintenance works and do not record the cost of the works

against specific road assets. As a result, while councils can access the overall

cost of their road maintenance program in their finance systems, they cannot

analyse the cost of maintaining each road. This lack of detail reduces councils’

ability to compare the cost of maintaining a road with the value it provides to

the community.

Buildings assets

Building, plant and equipment assets represent 10 per cent of the value of

Victorian council assets. Although a building can be considered as a single asset,

it also comprises asset categories—such as electrical equipment—and many

component assets—such as coolrooms, bathroom fixtures and switchboards.

Each of these component assets have specific maintenance needs, risks and

costs. Figure 2A outlines the relationship between component assets and

buildings.

Figure 2A Building assets

Source: VAGO.


Four of the audited councils assign work orders—tasks necessary to fix an

issue—to the building, rather than to the relevant component asset. In addition,

three audited councils—Colac Otway, Nillumbik and Mildura—do not separate

planned and reactive maintenance, and combine the maintenance and

operational costs into one account or work order for the building.

As a result, most councils do not have the information they need to make

decisions about maintaining and improving buildings. For example, without

information linked to component assets, councils must use an overall average of

building condition to predict future renewal costs. This is ineffective, as different

component assets may require renewal or replacement at different times. In

addition, if councils want to understand the maintenance and failure history of a

particular component asset, their staff need to review all work orders for that

building.

Darebin has started to assign planned tasks to building component assets and,

as a result, it can access planned contractor and material costs for these

components. If the council continues to do this, it will improve the quality and

usefulness of the building asset information.

Reviewing asset information

To ensure asset information is accurate and complete, councils need to review,

validate, correct and continuously improve it.

Of the audited councils, only two—Nillumbik and Mildura—have adequate

processes for validating asset data. Colac Otway and Darebin do not have

adequate processes, while Hindmarsh relies on contractors to conduct their

own quality assurance processes when collecting data. As a result, these

councils cannot assure themselves that they are collecting and using accurate

asset information.

In an example of better practice, Nillumbik's asset data framework—discussed

in Figure 2B—sets out processes for reviewing and validating data.

Figure 2B Nillumbik's asset data framework

Nillumbik has established asset data control and assurance processes to ensure that the information it collects is accurate and meets the council's information needs.

The council uses error scripting—a computer program that automatically checks data within a system for consistency—to validate its asset information on drains. This program highlights missing or inaccurate data and notifies the asset manager. The asset manager then sends the data back to the responsible person to correct any errors.

The council has also documented its procedures for receiving asset information from contractor reports. For example, one procedure details how to check and clean data from contractor condition reports.

In addition, the council rates its asset information by self‐assessing its availability and completeness. This provides the council with a higher confidence level in its data.

Source: VAGO, based on information from Nillumbik.


Completeness of asset information

We found Nillumbik had the highest completeness across all asset classes, with

an average completeness of 89 per cent. As shown in Figure 2C, councils have

more data on their road and related assets—an average of 67 per cent—than on

other asset classes.

Figure 2C Comparison of asset data completeness by asset class

Note: This self‐assessment considers the councils’ confidence in the data they collect at the building or asset category level.

Source: VAGO, based on audited councils’ data.

Confidence in asset information

Councils need to be confident that their asset information is accurate and

complete, so that they can use it to make evidence‐based decisions.

Except Nillumbik, the audited councils had low confidence that their asset

information was accurate and complete. As shown in Figure 2D, Nillumbik had

high confidence in 79 per cent of its asset information.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Colac Otway Darebin Hindmarsh Mildura Nillumbik

Completeness

Roads, paths, parking and traffic Buildings Drains, bridges and major culverts Recreation

2.5 Accuracy and completeness of asset information


Figure 2D Council confidence in accuracy and completeness of asset information

Note: ‘High confidence’ means available data is based on reliable information systems, records and procedures, with minor shortcomings only. ‘Low confidence’ means data is unconfirmed or based on cursory analysis. ‘No data’ means the council lacked information about the assets.

Note: Assets are weighted by estimated value.


The audited councils had more confidence in their roads data than in their other

asset classes, as shown in Figure 2E. As discussed in Section 2.3, this is due to

councils’ obligations under the RM Act.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Mildura

Darebin

Colac Otway

Hindmarsh

Nillumbik

High confidence Low confidence No data


Figure 2E Average data confidence by asset class

Note: Assets weighted by estimated value.


Except for Nillumbik, audited councils had low confidence that they had

accurate and complete data for parks and recreation assets—such as sporting

fields, playgrounds and trees. Nillumbik had higher confidence in this type of

data because it had identified and documented these assets in its Reserves

Asset Management Plan.

An AIMS is a software solution for capturing, managing and analysing asset

information. Councils need to select an AIMS that meets their needs, scale of

operations and available resources. To best support asset information

management, including using it to support decision‐making, an AIMS should

integrate the functions outlined in Figure 2F.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Roads, paths, parking andtraffic

Buildings Drains, bridges and majorculverts

Recreation

Percentage of assets

High confidence Low confidence No data

2.6 Asset information

management systems


Figure 2F AIMS functions

Source: VAGO, based on DTF’s AMAF.

To allow councils to effectively maintain and use their asset information, all

software applications that form a part of councils’ AIMS should be well

integrated.

Except Mildura, the audited councils use multiple software applications, but

these are not well integrated. In addition, Hindmarsh and Colac Otway have

limited documentation on how to use or manage their applications. This often

leads to manual data entry, resulting in inefficiencies and potential for error.

In 2017, Nillumbik hired a consultant to review its asset information

management applications. The consultant highlighted that the council had

procured and implemented its various applications over time, creating a

complex network of asset information management. They also found that the

council had not documented the links between these applications and instead

relied on staff knowledge of how the applications worked together. Nillumbik

advised that, in response to the consultant's findings, it has developed a plan to

prepare and implement a new AIMS over the next three years.


As outlined in Figure 2G, Mildura has purchased a single AIMS to meet its asset

information management needs.

Figure 2G Mildura's asset information management system

In 2014, Mildura purchased and began implementing a new AIMS. The system links to the council's customer relationship management system, geographic information systems and—through a manual export process—its finance system.

Although it has not done so yet, Mildura advises that it plans to enter data about all asset classes into the AIMS. To date, it has entered roads data and work orders and has recently started to enter parks and recreation data. The council has also not yet used the AIMS's cost modelling capability, which would allow the council to forecast future asset costs based on available asset information.

The council has established an AIMS project control group to oversee implementation of the AIMS. The group maintains a register of improvement tasks and issues, including software issues to address with the vendor. This helps the council to ensure the AIMS meets the council's needs.

Mildura advises that the AIMS has led to improvements in asset information and better management of work orders.

Source: VAGO, based on information from Mildura.


Using asset information

Councils should use the asset information available to them to inform their

asset planning and decision‐making, including decisions on acquiring, replacing

or renewing assets and ongoing maintenance activities.

More asset information is available to the audited councils than they use.

Although they use some of the information available to them for asset planning

and decision‐making—for example, information about road condition and use—

this is not consistent across all asset classes. Councils depend heavily on staff

experience and judgement for decision‐making, without properly supporting

this with objective data.

There is also room for improvement in how councils use risk to identify critical

assets and prioritise maintenance and investment. Although the audited

councils use risk‐analysis for their road and drainage assets, they should use it

across all asset classes to ensure that decisions about assets are evidence‐based

and best meet councils’ objectives.

Effective asset management and planning governance arrangements should

include:

an asset management policy that aligns with other council policies such as

risk and financial management

asset management plans across all asset classes

documented roles and responsibilities for asset planning, covering short,

medium, and long‐term timeframes for both capital and operational

projects

assurance processes to confirm that asset planning outputs—such as

strategies, plans and budgets—are evidence‐based and support

decision‐making

resource capability plans that outline the resources, skills and training

necessary for the council to analyse and use asset information.

3.1 Conclusion

3.2 Asset management governance


Asset management plans

AMPs document how a council plans to manage its assets to deliver an agreed

standard of service and meet community needs.

Nillumbik and Mildura have AMPs covering all asset classes, including roads,

buildings, and drainage.

In contrast, Colac Otway, Darebin and Hindmarsh do not have AMPs for all asset

classes and have multiple AMPs in draft format. Darebin previously had AMPs

for buildings and drainage, but the council did not finalise them.

Although the audited councils’ AMPs are useful—they record the overall

condition and age profile of asset classes—there is room for improvement.

Except Nillumbik, audited councils’ AMPs do not inform or align with capital and

operating budgets. For example, Hindmarsh's general AMP does not clearly

address service requirements or outline which asset information to use to

support decision‐making. A 2018 internal review of one of Darebin's AMPs

highlighted that it was not aligned to the council's long‐term financial plan.

Policies and guidance

We found that the audited councils have some high‐level policies and guidance

for asset management planning. However, these policies do not establish how

to use asset information in asset planning and decision‐making. The focus of

existing council guidance is on budgeting and accounting processes—such as

when to consider asset expenditure as a capital or operational expense.

In examples of better practice, Mildura and Nillumbik have multiple documents

to guide asset management decisions. Notably, Nillumbik has an asset lifecycle

policy that outlines the council's principles for accounting and reporting on

assets.

Capability and resources

None of the audited councils’ resource capability plans identify a need for skills

in analysing asset information. Without this, councils cannot be sure they have

the skills available to use asset information to support decision‐making about

assets.

Nillumbik engaged a consultant to review its asset management processes,

which also highlighted this as an issue. Nillumbik advised that it is in the process

of addressing this by reviewing current staff resourcing levels and skill sets to

develop workforce plans.

Roles and responsibilities

Audited councils have not established clear roles and responsibilities for the

use of asset information in asset planning and decision‐making. Colac Otway

and Mildura have recognised this gap. They advise that they plan to outline

roles and responsibilities for all phases of the asset lifecycle—including

decision‐making—in future asset management strategies.


In response to findings from an external review, Nillumbik has also begun

addressing this issue. Its AMPs now include functional roles and responsibility

matrices for asset information use and asset planning. Hindmarsh's position

descriptions include planning responsibilities. Darebin and Mildura advise that

they are currently revising position descriptions, however, their asset

frameworks do not articulate roles and responsibilities.

Using asset information to support decision‐making—as well as ongoing capital

and operational planning—helps councils to:

respond to community needs

address areas of higher risk to the council

share information to make decisions in a consistent way

allocate funding to maximise benefit.

Capital planning

Capital planning covers the decisions councils make about the creation of new

assets, or renewal or replacement of existing assets. Councils should document

their processes for making these decisions and support them with asset

information—such as performance, condition, utilisation, and maintenance

history.

All the audited councils have used asset information to support capital planning

decisions, however, this is not done consistently across asset classes. For

example, Hindmarsh uses road condition surveys to support decision‐making for

roads, but for other classes its renewal targets are based on a percentage of

depreciation costs.

Darebin also uses asset information to support capital planning for roads, but

does not do so consistently for other asset classes. However, it does use capital

works program guidelines and a submission form that sets evaluation criteria for

capital projects. Similarly, in 2015, Nillumbik developed a framework that set

evaluation criteria for capital projects. However, this was not finalised due to

restructures at the council. Setting criteria for capital projects encourages

councils to use and analyse asset information. For example, because of its

framework, Nillumbik used traffic volume to prioritise future road works, and

data on flooding to select capital projects for drainage.

Mildura uses project briefs to support bids for capital projects, however, these

do not consistently rely on the council's available asset information. For

example, the project brief for a street renewal did not consider the condition of

the road asset or traffic count data.

In late 2018, Colac Otway began using a new software tool that generates

replacement and renewal programs using asset condition data. Although this

represents a good use of asset information, the council could improve this

further by using population growth and service level data to ensure capital

planning decisions meet community need.

3.3 Asset planning and

decision‐making


Operational planning

Operational planning covers the day‐to‐day use and maintenance of assets.

Councils should use asset performance, condition, failure, maintenance and cost

information to inform their operational plans and budgets for assets.

Not all audited councils consistently use asset information to inform operational

plans and budgets. In an example of better practice, Colac Otway and

Hindmarsh have both documented processes for using asset information to

inform operational plans. Colac Otway also has an operational budget manual to

support the asset management system.

Nillumbik uses previous inspection budgets to plan for operational costs,

however, it does not review maintenance or failure history to inform

maintenance planning. Darebin documents planned maintenance tasks using

actual costs, but does not use this to inform operational plans or budgets.

Mildura uses some historic asset cost information in its operational budgets,

however, its staff advise they have low confidence in their cost estimates. All

audited councils document intervention levels for road assets, but do not

document their rationale, or whether they align with asset information.

As a result, councils are missing an opportunity to support decisions about how

they allocate finite council resources.

Relying on staff judgement

Relying heavily on staff judgement to make decisions about assets—rather than

informing decisions through asset information and documented processes—

creates a risk that councils will not make decisions that best meet their

objectives. It reduces councils’ ability to defend decisions and ensure they are

using resources efficiently to maximise value for their community.

Darebin, Hindmarsh and Mildura rely heavily on council staff experience when

making asset management decisions and do not always document these

decisions. For example, Darebin upgraded a drainage asset based on the asset

team's view of the maintenance team's capability and capacity to do the

required work, rather than information about the condition and use of the

asset. The council did not document this decision.

A key piece of asset information that councils should use to inform decisions

about assets is the risk or criticality of an asset. Incorporating risk management

into asset planning and decisions ensures that councils:

direct limited resources to areas and projects of greater importance

reduce the risk of assets being unable to support service delivery, or of

being inefficient or detrimental to the community's health and safety

consider risk, cost, and performance to prioritise or optimise investment

decisions.

None of the audited councils consistently uses risk information in their

decision‐making across all asset classes.

3.4 Asset risk informing

investment decisions


Audited councils do consider some risks for roads and drainage assets. All

councils rate the risk of roads using information about their function and

capacity. Nillumbik has also done so for footpath and trails—it assesses usage

data to rate footpaths and trails as high, medium, or low‐risk, and uses this to

drive maintenance and capital works.

Except Colac Otway, the audited councils have all used flood‐monitoring

programs to identify which drainage assets are critical to the council.

In an example of better practice, Mildura has mapped its drainage assets in a

geographical information system, using colours to indicate risk levels. Similarly,

Hindmarsh has identified critical drains and, as a result, increased inspections

on those assets. Nillumbik has also mapped and colour‐coded its asbestos

piping based on risk levels and uses risk assessment to plan inspections for

drainage systems, as discussed in Figure 3A.

Figure 3A Nillumbik's risk‐based approach to decision‐making

Nillumbik uses a risk‐based approach to prioritise camera inspections for its underground drainage systems. From this process, the council found that its pipes were in an excellent condition. It found that only a small proportion required work and it was able to complete localised renewal—such replacing pipe segments—rather than replace whole pipe lengths.

Similarly, the council identified where cleaning or maintenance works would return pipes to their required service level. Nillumbik advises that this reduced the potential cost of pipe inspections for the council.

Source: VAGO, based on information from Nillumbik.

In their AMPs, Darebin and Colac Otway refer to risk‐management frameworks

and document their risk assessments across asset class. However, they have

not used asset information to explain or quantify these risks. As a result, these

high‐level risk assessments do not support AMPs.

We reviewed the results of the audited councils’ 2017 NAMAF self‐assessments

in terms of asset information and compared them with our own findings.

We found that Colac Otway and Darebin's 2017 self‐assessments—both

showing low maturity—accurately reflect our findings. Darebin's 2017

self‐assessment differed greatly from its result in 2016, when it assessed its

asset management as excellent—the highest rating available. This difference

was partly due to new staff, who gave a more critical assessment score.

Nillumbik assessed its asset management as having excellent maturity, even in

advanced competencies. This aligns with our findings, as we found the council

has the documents NAMAF outlines as necessary for good asset management.

However, NAMAF does not consider the quality of councils’ asset information or

how they use it for decision‐making. This is an area for improvement for all

audited councils, including Nillumbik.

3.5 Comparison of audit findings with

NAMAF


NAMAF self‐assessment scores for Mildura and Hindmarsh were also high. This

does not align with our audit findings. This is because the assessments assumed

that councils would finalise the draft documents and activities that were in

progress at the time of the assessment, which did not always occur. These

councils also scored highly on the basis of documents that, although finalised,

council staff did not use.

This highlights limitations in the NAMAF questionnaire, which asks councils

about their documents, but does not give as much focus to whether councils

effectively implement them. Despite this, councils can still use NAMAF to ensure

they have the right documents and policies to support good asset management.


Appendix A Audit Act 1994 section 16—submissions and comments

We have consulted with Colac Otway, Darebin, Hindmarsh, Mildura, Nillumbik

and we considered their views when reaching our audit conclusions. As required

by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or

relevant extracts, to those agencies and asked for their submissions and

comments. We also provided a copy of the report to the Department of Premier

and Cabinet.

Responsibility for the accuracy, fairness and balance of those comments rests

solely with the agency head.

Responses were received as follows:

Colac Otway ......................................................................................................... 42

Darebin ................................................................................................................ 43

Hindmarsh ........................................................................................................... 46

Mildura ................................................................................................................ 49

Nillumbik ............................................................................................................. 51


RESPONSE provided by the Mayor, Colac Otway


RESPONSE provided by the Chief Executive Officer, Darebin


RESPONSE provided by the Chief Executive Officer, Darebin—continued


RESPONSE provided by the Chief Executive Officer, Hindmarsh


RESPONSE provided by the Chief Executive Officer, Hindmarsh—continued


RESPONSE provided by the Chief Executive Officer, Mildura


RESPONSE provided by the Chief Executive Officer, Mildura–continued


RESPONSE provided by the Chief Executive Officer, Nillumbik


Appendix B Maturity assessments

Figure B1 compares the results of our maturity assessment across the audited

councils.

Figure B1

Maturity assessment results


Figure B1

Maturity assessment results—continued

Source: VAGO.

Auditor‐General’s reports tabled during 2018–19

Report title Date tabled

Local Government Insurance Risks (2018–19:1) July 2018

Managing the Municipal and Industrial Landfill Levy (2018–19:2) July 2018

School Councils in Government Schools (2018–19:3) July 2018

Managing Rehabilitation Services in Youth Detention (2018–19:4) August 2018

Police Management of Property and Exhibits (2018–19:5) September 2018

Crime Data (2018–19:6) September 2018

Follow up of Oversight and Accountability of Committees of Management

(2018–19:7)

September 2018

Delivering Local Government Services (2018–19:8) September 2018

Security and Privacy of Surveillance Technologies in Public Places

(2018–19:9)

September 2018

Managing the Environmental Impacts of Domestic Wastewater

(2018–19:10)

September 2018

Contract Management Capability in DHHS: Service Agreements

(2018–19:11)

September 2018

State Purchase Contracts (2018–19:12) September 2018

Auditor‐General’s Report on the Annual Financial Report of the State of

Victoria: 2017–18 (2018–19:13)

October 2018

Results of 2017–18 Audits: Local Government (2018–19:14) December 2018

Professional Learning for School Teachers (2018–19:15) February 2019

Access to Mental Health Services (2018–19:16) March 2019

Outcomes of Investing in Regional Victoria (2018–19:17) May 2019

Reporting on Local Government Performance (2018–19:18) May 2019

All reports are available for download in PDF and HTML format on our website

www.audit.vic.gov.au

Victorian Auditor‐General’s Office

Level 31, 35 Collins Street

Melbourne Vic 3000

AUSTRALIA

Phone +61 3 8601 7000

Email [email protected]

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